Benchmarks for When One's Ready to Buy?

[KidsAccostinMe]

I realize that this may be oversimplifying things by a bit, but I am wondering if anyone has good goal points to work towards to become ready to buy a house. My husband and I are searching for a rental, as our current landlord is planning to sell, and we are finding over and over that in our Boston suburb, we would be paying significantly more in rent each month than on a mortgage in a house that fits our needs. I don't think we're ready to buy anytime soon, as our credit scores are pretty horrid and we have substantial debt (each of us went through divorces in the past 5 years). But we also can't comprehend losing so much money paying rent the way things currently are. We pay $2250 for a 3 bedroom now, and will need a 4 or 5 bedroom (4 kids). The rentals being advertised now are in the $3200-$4000 price range, most of them closer to the $4k.

So I know we should continue making on time payments, paying more than the minimums, etc,...but what financial benchmarks are sufficient for getting a home loan? I feel like renting at those rates would just bankrupt us. Thanks in advance!

[jpg7n16]

Rent vs mortgage payment is not a fair comparison.

Rent plus renters insurance vs mortgage plus homeowner's insurance plus taxes plus maintenance/repairs/upkeep plus HOA fees plus real estate market risk minus tax deduction; is a better comparison.


As far as your actual question, theres more of a checklist of sorts:

• No high interest rate debt
• EF in place with 3-6 months living expenses
• 20% down payment in addition
• Cost of mortgage (mortgage + taxes + insurance) < 28% of take home pay (quick calc method: pretax salary times 3 = max home value)

If all those things are in place, then it's safe to say you're ready to buy a home.

[Nightfly]

The New York Times published a pretty slick, interactive "rent vs. buy" calculator recently. It should give you some idea about when the best time to buy for your situation will be. However, after owning two homes in the last 15 or so years, both of which turned out to be financial disasters (in two completely different parts of the country); I'm pretty much on the side of the "not buying anytime again soon" crowd...

[jpg7n16]

The New York Times published a pretty slick, interactive "rent vs. buy" calculator recently. It should give you some idea about when the best time to buy for your situation will be. However, after owning two homes in the last 15 or so years, both of which turned out to be financial disasters (in two completely different parts of the country); I'm pretty much on the side of the "not buying anytime again soon" crowd...

I really like that calculator. Thanks for sharing!

Though the one thing I'm not sure it does is account for PMI if you are under 20% down. Other than that, excellent! I'm adding it to my favorites.

[kv968]

I really like that calculator. Thanks for sharing!

Though the one thing I'm not sure it does is account for PMI if you are under 20% down. Other than that, excellent! I'm adding it to my favorites.

It doesn't seem to take account for PMI but I like it, thanks Nightfly. Besides, we should be putting 20% down anyway

It's definitely better than most of the rent vs. own calculators I've seen since.